TMI Tax Updates - e-Newsletter
December 13, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Law of Competition Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. ORDINARY DIRECTOR – OFFICER-IN-DEFAULT?

   By: DR.MARIAPPAN GOVINDARAJAN

2. Keyman insurance policies- some important aspect of a financial tool for risk coverage and tax deferment.

   By: DEVKUMAR KOTHARI

News

1. Revival of Investor Interest in SEZs

2. Import of Rice and Wheat to Meet Domestic Demand

3. CAG of India briefs UN Secretary General on Conduct of UN Audit Vinod Rai Re-Elected Chairman of United Nations' Panel of External Auditors

4. Indian Coal Reserves to Last Over 100 Years

5. Cancellation of Coal Blocks

6. Coal India Limited to Setup 20 Coal Washeries

7. Foreign Exchange Earnings from Tourism Shows an increase of 22 percent Foreign Tourist Arrivals also goes up by 20 Lakh

8. Successful SME

9. Scheme for Assistance to Training Institutions

10. Growth in MSME Sector

11. Vacant Posts in DGCA

12. FDI in Aviation Sector

13. India's Foreign Trade: November 2012

14. Gross Direct Tax Collection Figures for April-November 2012-13 Up by 7.14 Percent at Rs. 3,25,696 Crore as Against Rs. 3,04,002 Crore in the Same Period Last Year

15. India’s Rank in the Global Competitive Index

16. Incorporation of the Corporate Social Responsibility Provision in the New Companies Bill

17. Changes in the Companies Bill 2011

Circulars / Instructions / Orders

FEMA

1. 57 - dated 11-12-2012

Exim Bank's Line of Credit to the Government of the United Republic of Tanzania

Customs

2. 29/2012 - dated 7-12-2012

Regarding functional control of Special Valuation Branches.

Companies Law

3. 39/2012 - dated 12-12-2012

Filing of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 1-4-2011.

Highlights / Catch Notes

Income Tax

• Director's Rental Income is Business Income; Shareholder's Rental Income is House Property Income.

  Case-Laws - AT : Rental Income - Business Income vs Income from House Property - rental income received from Ms. Rekha Jalan (director) has to be treated as business income and rental income received from Ms. Snehal who was only a shareholder has to be assessed as income from house property. - AT
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• Assessing Officer Lacks Jurisdiction to Issue Order After DRP Objection Withdrawal u/s 144C(13.

  Case-Laws - AT : Withdrawal of objection submitted before DRP - DRP has not issued any direction on merits of the proposed draft assessment order; therefore, the Assessing Officer got no jurisdiction to pass any order u/s 144C(13). - AT
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• Court Upholds Penalty for Taxpayer's False Depreciation Claim u/s 271(1)(c); Explanation Lacked Honesty and Accuracy.

  Case-Laws - HC : Imposition of Penalty u/s 271(1)(c) - The explanation given by the assessee for the depreciation claim, is neither bona-fide, nor substantiated - penalty confirmed - HC
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• Notional interest is excluded from municipal ratable value when calculating house property income.

  Case-Laws - AT : Computation of income - Income from house property - notional interest not to be included in the municipal ratable value - AT
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• Assessing Officer Rejects Assessee's Chosen Revenue Recognition Method Without Justification Under AS-9 Guidelines.

  Case-Laws - AT : As per AS-9 which gives the option of proportionate completion method and completed service contract method, out of which one is following by the assessee. AO rejected the books without any justification. - AT
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• Guidance on Section 54F Tax Exemption: Follow Leena J Shah Precedent Over Prema P. Shah for Capital Gains Clarity.

  Case-Laws - AT : Exemption u/s 54F – Capital Gain - The case of Leena J Shah (2005 (11) TMI 386 - ITAT AHMEDABAD), and not that of Prema P. Shah (2005 (11) TMI 182 - ITAT BOMBAY-J), should be followed for deciding the issue related to Section 54F. - AT
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Customs

• Request to Adjudicate Denied Due to Lack of Authority; Original Order Set Aside.

  Case-Laws - AT : Jurisdiction to adjudicate the matter - prayer made by the learned AR cannot be accepted as there is no adjudicating authority appointed to adjudicate the impugned show cause notice - Order in original set aside. - AT
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• Customs Case: Refund Claim Denied Due to Unjust Enrichment; Price Uniformity Doesn't Prove Duty Burden Stayed with Seller.

  Case-Laws - AT : Refund - unjust enrichment – uniformity in price before and after assessment does not lead to inevitable conclusion that incidence of duty has not been passed on to buyer as such uniformity may be due to various factors – refund claim rejected - AT
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• Royalty Payments Must Be Included in Transaction Value for Customs Duty Calculation to Ensure Accurate Duty Assessment.

  Case-Laws - AT : Transaction value for the purpose of levy of customs duty - royalty is paid for the supply of the goods as a condition of sale has to be necessarily included in the transaction value for the purpose of levy of customs duty - AT
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FEMA

• Supreme Court Affirms Banks Must Report Wilful Defaults, Including Derivative Transactions, to RBI per Master Circular Guidelines.

  Case-Laws - SC : Master Circular on Wilful Defaulters - dis-closer of information by the Bank to RBI - FWilful defaults of parties of dues under a derivative transaction with a bank are covered by the Master Circular and this we hold not because the RBI wants us to take this view, because this is our judicial interpretation of the Master Circular. - SC
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Corporate Law

• High Court Disallows Excise Department's Interest Claim Against Liquidated Company, Citing Unsustainable Grounds in Liquidation Context.

  Case-Laws - HC : Claim of Excise Department - Liability to pay Interest on principal amount - co. in liquidation - Claim of interest of the Department (Central Excise) dis-allowed - HC
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• Shareholder Disputes Shouldn't Automatically Lead to Company Winding Up; Explore Alternative Dispute Resolution First.

  Case-Laws - HC : The company should not be wound up merely because of disputes which have arisen between the two groups of shareholders; if the same can be resolved by alternate modes and these alternate modes must be exhausted in the first instance; the winding up of a company is the extreme and last remedy and should be resorted to only as a final resort - HC
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Indian Laws

• MRTP Act: Section 12B Compensation Claims Operate Independently from Sections 10 and 36B Powers.

  Case-Laws - SC : Maintainability of compensation applications u/s 12B of MRTP Act - These powers vested in the MRTP Commission under sub-section (3) of Section 12B of the MRTP Act are independent of its powers under Section 10 and Section 36B of the MRTP Act. - SC
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• Advocate Suspended for Three Years for Filing Compromise Deed with Forged Signatures, Guilty of Professional Misconduct.

  Case-Laws - SC : Professional misconduct of Advocates - filing a compromise deed by forging and fabricating the signatures - Thus it would be just and proper if the respondent-advocate is suspended from practice for a period of three years - SC
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Central Excise

• Show Cause Notice Invalidated for Being Time-Barred Due to Lack of Proof of Service Before Deadline.

  Case-Laws - AT : Service of show cause notice - in absence of any evidence regarding service of show cause notice on the respondent prior to 22-7-2005, the impugned order of Commissioner (Appeals) holding the show cause notice to be time barred cannot be faulted. - AT
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• Excise Duty Remission Granted for Goods Destroyed in Fire Due to Short Circuit, Evidence Deemed Adequate.

  Case-Laws - AT : Remission of excise duty - fire incident - appellant has placed sufficient material on record to show that finished/semi-finished goods were destroyed in fire accident cause due to short circuit - appellant is granted remission of excise duty pertaining to the goods destroyed in fire - AT
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Case Laws:

• Income Tax

• 2012 (12) TMI 379
  Reopening of assessment - deduction u/s 80IA - Pricing of power and quantum of profits eligible for deduction - Escapement of Income - mere change of opinion - held that:- assessment is sought to be reopened by a notice dated 31.03.2008 which is admittedly beyond 4 years from the end of assessment year 2001-02 - first proviso to Section 147 is applicable and in the absence of failure to disclose fully and truly all material facts necessary for assessment it cannot be said that there has been any escapement for the assessment year 2001-02. In such circumstances, there could be no failure on the part of the respondent to disclose facts which are not in its possession during assessment proceeding leading to the order dated 23.03.2004. The jurisdiction to exercise powers of reopening and assessment is specifically barred in respect of any matter which has been a subject matter of appeal by the 3rd proviso to Section 147 of the Act. Further issue of application of Sec 80IA (10) of the Act instead of Sec 80IA (8) of the Act to arrive at the profit for claiming deduction under Section 80IA of the Act is a mere change of opinion without any tangible material which would not warrant reopening of assessment. The material to reopen the assessment being relied on by the revenue seems to be the order of MERC dated 01.07.2004 which has nothing to the with arriving at profits for purposes of deduction under Section 80IA of the Act but deals with fixing of the power tariff for the consumer and for that purpose takes as one of the ingredients 16% return on investments - no fault can be found with order of the Tribunal dated 14.05.2010 - questions of law as formulated does not raise any substantial question of law - decided in favor of assessee.

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• 2012 (12) TMI 378
  Rental Income - Business Income vs Income from House Property - nature of income - assessee had received rent from letting out of the property being flats and therefore, income has to be assessed as income from house property. However,assessee has raised a plea that the part of the property i.e. 65% had been let out to the director Ms. Rekha Jalan for her residence which had to be treated as business user of the property and in such cases income from such asset has to be treated as business income. The plea raised by the assessee is supported by judgment of Hon'ble High Court of Madras in the case of New India Maritime agencies Pvt. Ltd.[2001 (6) TMI 27 - MADRAS HIGH COURT], in which it has been held that the buildings owned and occupied by the Director of the assessee company has to be treated as used for business and income derived has to be assessed as business income - held that:- rental income received from Ms. Rekha Jalan has to be treated as business income and rental income received from Ms. Snehal who was only a shareholder has to be assessed as income from house property. Determination of annual value - income from house property - rental income from Ms. Snehal Jalan - Applicability of the provisions of Rent Control Act - held that:- The provisions of Rent Control Act can be applied only in case of bonafide letting out of properties and not in case of colourable transactions which are only an arrangement to reduce tax liability. In this case the company had let out the property to the daughter of the director who controlled the company and is responsible for taking all decisions Instead of letting out the property at market rate which is very high, the director had let out property to her daughter at a very low rent, obviously to reduce tax liabilities. Therefore, in our view, the provisions of Rent Control Act cannot be applied to such arrangements. Accordingly we hold that annual value in relation to part of the property let out to Ms. Snehal Jalan will be the fair rent in the market based on comparable cases. Deduction on account of municipal taxes @ 30% u/s 24(a) - held that:- municipal tax paid by the assessee will be allowable as deduction @ 30% while computing income from house property. As regards the portion let out to its director income from which has been held as assessable as business income, the deduction on account of municipal tax will obviously be allowable. Administrative expenses - assessee was not doing any business since long - AO disallowed the claim of expenses ie 65% of rental income being received from director was assessable as business income and only 35% of the rent received from the share holder could be assessed as house property income - held that:- 65% of administrative expenses should be allowed. Interest income received from ICDs and bills discounting - business of financing is one of the objects in MOA and assessee had been undertaking these activities in an organized manner - held that:- in assessment year 2005-06 in scrutiny assessment u/s 143(3) had treated the income as income from other sources which was accepted by the assessee as no appeal was filed. Though in subsequent years the business income declared by the assessee has been accepted but those assessments were covered in summary scheme in which the AO was not empowered to take any view regarding computation of income and had to simply accept the returned income. Therefore, acceptance of business income under section 143(1) in subsequent years can not be taken as decision by authorities to accept the claim of the assessee. There is nothing to show that assessee was engaged in these activities in an organized manner - held that:- Assessee had surplus fund which had been invested to earn interest income which in our view has been rightly assessed as income from other sources - order of CIT(A)is confirmed.

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• 2012 (12) TMI 377
  Undisclosed Additions - cash purchases made from Jindal Electro Casting Pvt. Ltd., Hissar, to the extent of Rs. 86,87,000/- for assessment year 2000-01 and Rs. 2,42,71,186/- for assessment year 2001-02 in dispute - additions to the extent of Rs. 62,37,000/- and Rs. 2,22,19,840/- were deleted by CIT (A) in appeals filed against the original assessments and his order was accepted by the Revenue which did not file any appeal before the Tribunal - assessee filed appeals before the Tribunal against the additions sustained by CIT (A) - held that :- since Revenue accepted order of CIT (A) in the first round of proceedings, deleting substantially the additions made by AO. It did not prefer any appeals to the Tribunal against the relief of Rs. 62,37,000/- and Rs. 2,22,19,840/- granted by the CIT (A) respectively for assessment years 2000-01 and 2001-02. Matters which have attained finality cannot be re-agitated - Revenue failed to file appeals before the Tribunal challenging the relief granted by the CIT (A) in the first round of proceedings. That part of the assessment orders, therefore, got merged with the order of CIT (A), which became final. It was, therefore, not open to the Assessing Officer to tamper with their finality, so far as the relief granted by the CIT (A) is concerned. Tribunal has rightly held that the Revenue cannot question the relief granted by the CIT (Appeals) on the principle of finality of orders. In our opinion, therefore, no question of law arises for our consideration. The appeals of the revenue are accordingly dismissed with no order as to costs.

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• 2012 (12) TMI 376
  Exemption u/s 10(23C) - assessee is a registered society formed by Govt. of Madhya Pradesh for promotion and development of open school system in the State - As per audited accounts, assessee showed gross receipt of Rs. 14,34,36,039/- resulting into surplus income of Rs. 3,65,49,479/-. AO found that assessee did not file return of income for the A.Y. 2006-07, therefore, notice u/s 148 was issued. Held that:- Huge surplus has been generated by the assessee, therefore, it can be said that the profit motive of the assessee is clearly established. During hearing, the ld. Counsel for the assessee contended that the word "substantially" will be made even if the grants are 10%. We are not agreeing with this proposition because the word is "wholly or substantially", meaning thereby, either it can be 100% or near to 100% but in any case may not be less than 75% because it has been used with the word wholly and not singularly. Admittedly, there is no clear cut formula regarding per centage in the Act but some figure may be adopted under the facts and circumstances available on record. Assessee has not complied with two essential conditions as stipulated in the Act, therefore, we find no infirmity in the conclusion drawn in the impugned order. It is upheld. Finally, all these appeals are dismissed.

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• 2012 (12) TMI 375
  Validity and maintainability of assessment order - withdrawal of objection submitted before DRP - assessee submitted that when the Assessing Officer has already passed the order u/s 144C(3) r.w.s 143(3) after the clarification issued by the CBDT, then the application/objection before the DRP is to be treated as non-est and the DRP became functus offico. He has further submitted that the objections were withdrawn by the assessee prior to the issue of notice of hearing in the matter and also prior to the expiry of 30 days from the date of receipt of the draft order from the Assessing Officer. Therefore, no direction ought to have been issued by the DRP. held that:- when the objections filed by the assessee were allowed to be withdrawn on the ground that the assessee intend to exercise the option to proceed to file appeal before the Commissioner of Income Tax(Appeals), then there cannot be any direction under sub-sec. (5) in the absence of any objection as required under sub-Sec. (2) of sec. 144C of the Act. It is clear from the order dated 13.7.2010 of the DRP that the DRP has not issued any direction on merits of the proposed draft assessment order; therefore, the Assessing Officer got no jurisdiction to pass any order u/s 144C(13). Hence, the order dated 20.8.2010 passed u/s 144C(13) r.w.s 143(3) by the Assessing Officer is without jurisdiction and accordingly is not sustainable. Even otherwise, when the Assessing Officer has already passed an assessment order dt 10.2.2010 u/s 144C(3), then the second order would result multiplicity of litigation. - Decided in favor of assessee.

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• 2012 (12) TMI 374
  Excise duty refund/set off - whether said amount is to be included in the business profits for the purpose of deduction u/s 80IB of the Income Tax Act - held that:- looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construed as mere production and trade incentives, as held by the Tribunal - receipt are capital receipt - Decided in the favour of the assessee. Decision in Shree Balaji Alloys v. CIT [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] followed.

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• 2012 (12) TMI 373
  Imposition of Penalty u/s 271(1)(c) - furnishing inaccurate particulars of income - understatement of Income on sale of cylinders - Income on sale of cylinders - held that:- in the penalty proceedings,CIT(A) by order dated 30.3.1995 confirmed the imposition of penalty. - The Tribunal deleted the penalty held that:- tripartite agreement made by assessee cannot be considered as valid. persons who make claims of this nature, actuated by a mala-fide intention to evade tax otherwise payable by them would get away without paying tax legally payable by them, if their cases are not picked up for scrutiny. There can be no doubt that the assessee was aware of the true nature of the transaction, despite which the claim for depreciation was made. Its claim was rejected as sham, by this Court – that order has become final. The explanation given by the assessee for the depreciation claim, is neither bona-fide, nor substantiated - cancellation of penalty was unwarranted. The impugned order is accordingly set aside; the order of the AO imposing penalty is restored.

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• 2012 (12) TMI 372
  Extension of stay of demand - stay beyond 365 days - T.P adjustment and disallowance u/s 40(a)(i) - held that:- inherent jurisdiction of the Tribunal to grant Interim relief so as to make the ultimate relief effective cannot be curtailed indirectly by Sub-section (2A) of sec. 254 of the Act. At the end of the period of 365 days when the appellant makes an application for extension of the stay, the Tribunal can always consider whether there is any change in the circumstances which would justify extension or modification of the stay The Revenue gets an opportunity to bring to the notice of the Tribunal such changed circumstances - when there is nothing to suggest that delay in disposal of appeal is attributable to the assessee, we extend the period of stay of demand until 31st March, 2012 or until disposal of appeal, whichever earlier - assessee shall not seek adjournment on the date of hearing of the appeal, now fixed for 8.11.2012 and in case of breach of this condition, the stay granted shall be vacated forthwith unless directed otherwise by the Bench. Decided in the case of Hon'ble Bombay High Court in CIT vs.Ronuk Industries Ltd [2010 (11) TMI 461 - BOMBAY HIGH COURT] followed.

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• 2012 (12) TMI 371
  Computation of income - Income from house property - Inclusion of notional interest in the municipal ratable value - calculation of notional interest on advance rent received and security deposit(used for renovation) while determining annual value of the let out property - The rent payable as per the lease agreement from the said tenants was Rupee 1/- per sq.ft. per month. The total rent of Rs. 2,54,400 thus was received for the year under consideration from the tenants in respect of Jindal Mansion and since the municipal ratable value of the said building at Rs. 10,61,190 was higher than the actual rent received, income under the head "Income from house property" was declared by the assessee in is return of income by adopting the municipal ratable value. According to the AO, interest on security deposits taken by the assessee from the tenants was liable to be added on notional basis to the actual rent received by the assessee in order to determine the annual letting value of the building owned by the assessee. Held that:- following the decision of court in case of Dy. CIT Versus Reclamation Realty India Pvt. Ltd [2010 (11) TMI 477 - ITAT, MUMBAI] AO directed to accept the income from house property declared by the assessee adopting the municipal ratable value as annual letting value of its property. - in favor of assessee.

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• 2012 (12) TMI 370
  Royalty received on account of distribution of films - DRP directing income being generated by the distribution and exhibition of the films in India by the Agent of the assessee WIPL on behalf of the assessee in India, income accrues and arises in India is tenable or not - held that:- even if income arises to the Non-Resident due to the business connection in India, the income accruing or arising out of such business connection can only be taxed to the extent of the activities attributed to permanent establishment. In this case, the assessee does not have any permanent establishment in India. Since the Indian company who obtained the rights is acting independently, Agency PE provisions are not applicable to the assessee company. Incomes arising to a Non-Resident cannot be taxed as business income in India, without a PE. As the assessee does not have any permanent establishment in India, the incomes arising outside Indian Territories cannot be brought to tax. Therefore, there is no need to differ from the findings of the CIT (A) and accordingly Revenue Appeal is dismissed - in favor of assessee. Decision in the case of Ishikawajma-Harima Heavy Industries Ltd v. Director of Income Tax [2007 (1) TMI 91 - SUPREME COURT] followed.

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• 2012 (12) TMI 369
  Set off of loss u/s 71 - Whether loss under head PGBP can be set off against income held as unexplained investment u/s 69 - Held that:- Following the decision in case of D. P. Sandu Bros. Chembur P. Ltd. (2005 (1) TMI 13 - SUPREME COURT) that since the assessee has not given any explanation about the source of cash deposits made into his saving bank account, it is not proved that this income is generated from out of his business of trading in shares. Since the assessee did not prove that the deemed income is liable to be taxed under any particular head, such deemed income shall fall under the head ‘income from other sources’. Therefore, the AO is directed to allow set off of business loss against income from other sources in accordance with the provisions of Sec 71. Issue decides in favour of assessee

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• 2012 (12) TMI 368
  Validity of Order by CIT u/s 263 - Deduction u/s 80HHC - AO allowed deduction u/s 80HHC without setting off of carry forward loss – CIT issue order on the basis of decision in case of IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT) – Assessee contended that Hon’ble Madras High Court granted an ad-interim stay on validity of retrospective amendment to Sec. 80HHC - Held that:- As in the case of Avani Exports & Others v. CIT & Ors.(2012 (7) TMI 190 - GUJARAT HIGH COURT) holding that amendment to Sec 80HHC is prospective and could be given effect from the date of amendment and not in respect of earlier assessment years is also nothing to do with the ratio of the decision in case IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT). Therefore, CIT u/s 263 in directing the AO to allow deduction u/s 80HHC in accordance with law. Issue decides in favour of revenue

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• 2012 (12) TMI 367
  Addition made on account of unproved trade creditors – Bogus trade creditors - Additions were made based on the report of the Income Tax Inspector – Held that:- Following the decision in case of Smt. Rolex Sugunamary (2012 (10) TMI 412 - ITAT CHENNAI) that the purchases made by the assessee during the period and payments were also made through banking channels. The AO has not disputed the purchases and the payments made by the assessee. The trading results have also not been disturbed. The report of Inspector cannot stand against the overwhelming evidence referred. Delete the addition. Issue decides in favour of assessee

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• 2012 (12) TMI 366
  Disallowance u/s 40A(2)(b) – Excess payment to related parties - Purchase of goods at higher prices then market price – Held that:- As the AO failed to consider that the purchases from related parties were of finished and semi-finished leather and whereas, the purchases from unrelated concerns were of raw leather. Moreover, the types and quality of skin purchased were also different. Without going into these details, the AO merely considered the average rate of purchases and reached a conclusion that the prices paid to the related parties were excessive for which there is no basis. Delete the addition. Appeal decides in favour of assessee

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• 2012 (12) TMI 365
  Disallowance of Excess rent paid - Properties occupied by the assessee and belonging to one of the group concerns – Held that:- The rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance by following the decision in assessee’s own case. Issue decides in favour of assessee Addition on account of interest – Excessive rental deposit free of interest made to sister concern – Held that:- For the years before us also, the facts are identical. Therefore, respectfully following the order of the Tribunal, wherein the Tribunal has deleted the disallowance of interest, for these years also, we delete the disallowance of interest, holding that the deposits were made for taking the premises on rent which was necessitated by business expediency and are based on market rent. Issue decides in favour of assessee

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• 2012 (12) TMI 364
  Disallowance of depreciation on windmill - AO disallow depreciation on the basis of statement given by Executive Engineer of TNEB during survey u/s 133A – Held that:- Following the decision in case of S.Khader Khan Son (2007 (7) TMI 182 - MADRAS HIGH COURT) that the statement of the Executive Engineer cannot be used against the assessee. Except for the statement of Executive Engineer, the Department has no other conclusive evidence to show that the windmill was not commissioned or no unit of electricity was generated on 31.3.2005. Appeal decides in favour of assessee

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• 2012 (12) TMI 363
  Deduction u/s 80IB - 80HHC – Revenue argued that deduction u/s 80HHC has to be computed only on the profits available after allowing deduction u/s 80IB – Held that:- Following the decision in case of MRF Limited (2009 (10) TMI 653 - MADRAS HIGH COURT) that both the two sections are independent and therefore the deduction can be claimed under both the sections on the gross total income. Issue decides in favour of assessee. Deduction u/s 80IB - Whether Job work charges eligible for deduction u/s 80IB – Held that:- Following the decision in assessee’s own case that for a person to be engaged in manufacturing activity it is not sine qua non that he should undertake all manufacturing activities by himself. It would be enough if he engages himself in a part of manufacturing activity and gets rest of it done through the agency of others. Therefore, the assessee is entitled to deduction u/s 80IB in respect of profits derived from the job work production. Issue decides in favour of assessee

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• 2012 (12) TMI 362
  Compute profit u/s 44AE by rejecting the books u/s 145 - Whether AO applies presumptive tax rate in case where books are maintained by assessee - Assessee being builder regularly follows project completion method and book revenue only when possession of the constructed building is given - Same was accepted by revenue in earlier years – AO reject the books in view that revenue is to be recognized in the year in which it has been earned and the same cannot be postponed on the ground of following projection completion method - Held that:- As per AS-9 which gives the option of proportionate completion method and completed service contract method, out of which one is following by the assessee. AO rejected the books without any justification. Whereas project completion method followed by the assessee, and the entire profit of the project has been offered to tax by the assessee. Appeal decided in favour of assessee.

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• 2012 (12) TMI 361
  Deduction u/s 80IB (10) - AO denied on the ground that the commercial area in the project is more than 2000 sq.ft.- Built up area of some of the flats is more than 1500 sq.ft – Held that:- Assessee contended that after excluding the balcony/terrace the total built up area of none of the flats exceeds 1500 sq.ft. Whereas AO argued that some of the residential units have a built up area exceeding 1500 sq.ft. even when the terrace area is excluded. Therefore, Issue needs fresh adjudication and decides on the basis that total built up area of flats excluding the balcony/terrace area, not exceeds 1500 sq.ft as decide in case of Prime Properties (2012 - TMI - 217271 - ITAT, PUNE). Issue remand back to AO.

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• 2012 (12) TMI 360
  Deduction u/s 80IB – Whether deduction u/s 80IB will be allowed in respect of whole project or on partial basis - Assessee is a firm engaged in business of builder and promoter - AO has denied the deduction on the ground that project was not complete within the stipulated time - Completion certificate was obtained and furnished before the AO for 173 out of 205 flats – Held that:- Assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. - Restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. Therefore, assessee is entitled for benefit u/s.80IB(10) in respect of 173 flats completed before prescribed limit. Issue decides in favour of assessee

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• 2012 (12) TMI 340
  Nature of application software - Capital or revenue in nature – Held that:- The tests generally applied to decide the nature of expenditure as to whether it is capital or revenue, are the fact of enduring benefit, ownership test and functional test. Following the decision in case of Amway India Enterprises (2008 (2) TMI 454 - ITAT DELHI-C) held that examination of whether software expenditure incurred is capital or revenue in nature would require to be done in respect of each and every software independently having regard to the criteria / principles laid down. Issue remand back to AO

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• 2012 (12) TMI 339
  Penalty order u/s 13 of the Interest Tax Act, 1974 – Concealment of particulars of chargeable interest or furnishing of inaccurate particulars of chargeable interest – Held that:- As concluding from the facts of the case assessee had shown receipt of in the P&L account on account of interest others but this receipt was not included in the computation of chargeable interest. Following the decision in his own case by Delhi High Court held that on account of interest other, was added to the chargeable interest of the assessee. In favour of revenue Recording in the assessment order u/s 8(2) - Satisfaction as warranted by Sec. 13 for initiating the penalty proceedings - Held that:- As concluding from the facts of the case AO has not recorded satisfaction in course of assessment proceedings and simply initiated penalty. Following the decision in case of Ram Commercial Enterprises (1998 (10) TMI 13 - DELHI HIGH COURT) held that merely because penalty proceedings had been initiated it cannot be concluded that satisfaction as warranted u/s 13 was arrived at and Diwan Enterprises (1998 (11) TMI 27 - DELHI HIGH COURT) held that unless requisite satisfaction was recorded in the proceedings under the Act, the jurisdiction to initiate the penalty proceedings could not have been exercised. Thus, the entire penalty proceedings were without jurisdiction. In favour of assessee

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• 2012 (12) TMI 338
  Deduction u/s 80HHBA – Deduction u/s 80HHB – Assessee was engaged in the business of engineering and technical consultants – Deduction claimed in relation to derive profits from the business of execution of a foreign project – AO argued that assessee’s role in the above works are of consultancy and supervisory nature which cannot be treated as an integral part of execution of any project. Whether services rendered by the assessee fell within the scope of the expressions “execution of a foreign project” or “execution of a housing project’’ and the profits derived from such services are eligible for the deduction u/s 80HHBA it has to be complemented by an equally important aspect of the supply of the designs, drawings and such other technical or technological inputs as well as supervisory and engineering services rendered by the assessee company Both the physical as well as technical aspects of the project are equally important and one cannot be separated from the other. Therefore assessee is entitled to the deduction both u/s 80HHB and u/s 80HHBA. In favour of assessee

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• 2012 (12) TMI 337
  Undisclosed investment – Assessee had purchased agricultural land – AO argued that the purchase price was quite low as compared to the prevailing market rate of the land – AO made addition considering jantri price and auction price of SUDA – Held that:- Following the decision in case of Virjibhai Kalyanbhai Kukadia (2012 (10) TMI 791 - ITAT AHMEDABAD) and Naresh Khattar (HUF) (2003 (1) TMI 77 - DELHI HIGH COURT) held that merely on the basis of fair market value no addition can be made u/s. 69B. Section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment u/s. 69. AO has failed to bring on record any material to support the rates estimated by him. In favour of assessee

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• 2012 (12) TMI 336
  Penalty u/s 271(1)(c) – Whether mere submitting a claim which is incorrect in law would amounts to concealment of income – Assessee earn dividend from UTI MIP and claim exemption of such amount u/s 10(15) - After pointed out by AO, assessee admitted said income – AO made addition of said dividend income and levy penalty u/s 271(1)(c) - Held that:- Following the decision in case of Zoom Communication Pvt. Ltd (2010 (5) TMI 34 - DELHI HIGH COURT) held that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. In favour of revenue

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• 2012 (12) TMI 335
  Capital gain or business income - Whether the income earned from the activity of purchase and sale of shares could be treated as PGBP or capital gain - Assessee is a sub-broker and has also carried out purchase and sale of shares on own account - Assessee is maintaining two separate portfolios i.e. investment portfolio and trading portfolio – Held that:- As the assessee has long term and short term capital gain out of the investment portfolio and it is not the case of the Revenue that any point of time the assessee has mixed up the above two portfolio and merely because the assessee had sold the shares in the relevant year and made substantial gain does not mean that transactions of investment portfolio were not as an investor but as a trader. Following the decision in case of Rewashanker A. Kothari (2006 (1) TMI 80 - GUJARAT HIGH COURT) this issue decides in favour of assessee Disallowance of STT u/s 40(ib) (Securities Transaction Tax) - Assessee has debited the STT to the brokerage account and had credited to P&L account by brokerage which is net of STT and other debts – Assessee claims that he has not charged security transaction tax and has maintained separate accounts in his books of accounts - Held that:- In the absence of the evidence issue required to reexamined. Remand to AO

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• 2012 (12) TMI 334
  Exemption u/s 54F – Capital Gain - Whether assessee was eligible for claiming exemption u/s 54F on purchase of residential premises outside India against the capital gains earned from sale of residential house in India - Assessee is a citizen and resident of USA – Held that:- The words 'Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house' occurring in section 54F means 'investment in residential house in India' and not 'residential house anywhere else in the world'. As stated earlier the words 'in India' may not occur in the relevant provisions, but sub section 3 refers to imposition of capital gains tax, if the asset is transferred within a period of three years and such contemplated transfer can be of a house existing in India. - In favour of revenue The case of Leena J Shah (2005 (11) TMI 386 - ITAT AHMEDABAD), and not that of Prema P. Shah (2005 (11) TMI 182 - ITAT BOMBAY-J), should be followed for deciding the issue related to Section 54F.

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• 2012 (12) TMI 333
  Validity of reassessment u/s 147 - Disallowance u/s 40(a)(ia) – Non-deduction of TDS on payment made to Non-resident - Disallowance was made in a reassessment done when the original assessment was completed u/s 143(3) – Held that:- As all the details relating to TDS on payments made to non-residents, were duly disclosed by the assessee at the time of original assessment. This has not been rebutted by the Revenue. Reopening for a reason that assessee had not deducted tax at source, was not warranted. Especially so, since four years had lapsed from the end of the impugned assessment year, when the re-assessment proceedings were initiated. First proviso to Section 147 of the Act clearly applied and Revenue was unable to show any failure on the part of the assessee to disclose materials or particulars relevant to impugned assessment year. Appeal decides in favour of assessee

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• 2012 (12) TMI 332
  Cost of construction – AO adopted value determined by the Departmental Valuation Officer – Tribunal directed AO to apply state PWD rates for the valuation of construction and instead of CPWD rates – CIT(A) orders reduction of 15% from cost estimated based on CPWD rates would automatically give a valuation at par with State PWD rates - Held that:- Nothing was brought on record by revenue to show that a reduction of 15% on the value based on CPWD rates would give a value at par with State PWD rates. Unless and until this can be demonstrated, we cannot say that the orders of authorities below are in accordance with the directions given by this Tribunal. Nevertheless, we also note that assessee did not give a valuation based on PWD rates before the AO. Therefore, matter has to go back to AO once again for deciding the issue in accordance with directions of the Tribunal. Appeal remand back to AO. Depreciation on motor Car – Personal v/s revenue expense - Assessee has purchased a car during the relevant P.Y. - AO stated that the said vehicle was classified under Non-Transport category - Business was carried on in Kumbakonam, whereas, the car was registered in Chennai - Disallowed the claim of depreciation on the car considering it to be personal in nature – Held that:- The car might have been registered as Non- Transport category vehicle, but, this will not preclude an assessee from using it for the purpose of its business. There is no Rule that every vehicle owned in a business, even if used by employees and executives, also should be registered as Non-Transport category vehicle. Just because the car was registered in Chennai and business of the assessee was in Kumbakonam, would not be a reason to disallow the claim of the assessee. Therefore, its claim that the car was used for the purpose of business could not have been brushed aside. Depreciation allowed. Appeal in favour of assessee Income from house property – A.O. had made the addition for rental income based on the report of his Inspector – Held that:- As such a report was never put to the assessee for her rebuttal. Findings of the AO and assertions of the assessee are at loggerheads. Nothing is available on record to verify which of this is correct. Therefore, issue remand back to AO

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• 2012 (12) TMI 331
  Addition made in respect of Long Term Capital Gains - CIT(A) deleted the addition - additional evidence consists of copy of Termination Agreement furnished to the CIT(A) as per rule 46A - Held that:- CIT[A] has admitted certain additional evidence in violation of the provisions of Rule 46A without affording any opportunity to the AO and has decided the appeal on the basis of the Termination Agreement dt. 26.3.2009 which was not before the AO and this has also been challenged by the Revenue as per the additional ground of appeal. Since CIT(A) has grossly erred in not giving any liberty to the AO to consider the said Termination Agreement following the principles of natural justice this issue back is restored to the files of the AO to examine the termination agreement & recompute the capital gains tax liability in the light of the provisions of sec 45(1) - in favour of Revenue for statistical purposes.

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• 2012 (12) TMI 330
  Disallowance of deduction u/s 80IA - no element of developing, operating and maintaining any infrastructural facility - Held that:- Considering the description of the work executed by the assessee in the relevant period is certainly not the development of any infrastructure as the Champakara and Udyogmandal canals in Kerala were constructed/developed decades ago. What work the assessee executed in respect of these two canals and the Tapi riverbank viz. rip-rap masonary for protection of the canal bank and river bank can at best be work which is a sub-activity in the category of repairs and maintenance thereof rather than development of an infrastructure facility namely, inland waterways which has been done by IWAI. We are of the considered view that the assessee executed works contracts on behalf of the concerned Government bodies and there is certainly no element of developing or operating and maintaining or developing, operating and maintaining of any infrastructure facility as envisaged in clause ( c ) to the Explanation to sub-section(4) of section 80IA - against assessee. Addition being the amount of shortfall in the contract receipts - Held that:- As the assessee was not able to controvert the findings of the AO and CIT(A) that the assessee was unable to explain or reconcile the difference of Rs.40,582 in the contract receipts declared by the assessee and the contract receipts reflected in the TDS Certificates of Indian Oil Corporation, Mangalore Chemicals & Fertilisers and The Indian Navy. As this fact was acknowledged by the assessee before the AO in the course of assessment proceedings no hesitation in confirming the addition made by the AO in respect of undeclared contract receipts - against assessee.

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• 2012 (12) TMI 329
  Denial of claim of 50% discount in respect of valuation of stock - stock was obsolete and got out of fashion and as such it was put up for sale at 50% discount - Held that:- This would not be possible as valuing part of the stock at market price and other part of the stock at “cost price” is not permissible in law. - in accordance with method of valuation of stock adopted by the assessee i.e. lower of “ cost or market value”, no further deduction for discount sale could be allowed to the assessee - against assessee. Rejection of claim of the stock - bills for which were not credited in the books of accounts, pending for accounting - Held that:- As the assessee has produced bills amounting to Rs.2,42,501/- and has claimed in its return of income before the department merely because there was delay in making the claim and the claim was not made at the time of survey itself or at the time of making statement of the partner of the assessee-firm, it could not be said that the facts should not have been verified by the AO and credit of the bills claimed to be available at the business premises of the assessee at the time of survey was not allowable. There is no material before us to suggest that any exercise to verify the genuineness of the bills was made by the AO at any stage of the assessment and no reason for not doing so could be assigned - in favour of assessee. Deletion of addition by CIT(A) - Revenue appeal - Held that:- As admissibility of appeal filed by the Revenue in the light of various instructions issued by CBDT from time to time wherein monetary limits for filing departmental appeals (Income-tax matters) and other conditions were specified, restricting filing appeals before Appellate Tribunal. As tax effect in this case is less than Rs.2 lakhs therefore the present appeal of the department is not maintainable - in favour of assessee.

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• 2012 (12) TMI 328
  Claim of deduction u/s. 80 IB (10) disallowed by AO - CIT(A) allowed the claim - Held that:- As decided in CIT Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] section 80IB(10) provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances. It does not provide that the land must be owned by the assessee seeking such deductions - The relevant terms of development agreement are to be examined so as to ascertain the terms on which the assessee was granted right of construction of a housing project & on the basis of the terms and conditions, it has to be ascertained whether it was a “work contract” or a “Development Contract”& whether under the agreement the assessee had been given full authority to develop the land & AO has to examine about the “profit” or “loss” arising from the said project. CIT(A) has passed the order finding justification only on the issue of ownership of the land based on the development agreement and has unjustly allowed the claim of the assessee - set aside the order of the learned CIT(A) and remit back the case to the file of ht e learned CIT(A) to pass appropriate order - in favour of Revenue.

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• 2012 (12) TMI 327
  Provision paid as salary to the employees before filing of the return - addition to income deleted by CIT(A) - Held that:- The addition was made by the AO on the plea that the assessee debited the impugned amount as provision for cadre staff salary whereas the claim of the assessee, during assessment proceeding that the provision for cadre staff salary was paid to District Cooperative Bank and that since payments could not be paid before 31.3.2008, the impugned amount of Rs.1.20 crores was debited in the p & L account towards provision for cadre staff salary. A sum of Rs.1,19,49,383/- was paid before filing the return of income, therefore, as per provision of Sec. 43B, salary paid to the employees, before filing the return of income, is an allowable deduction - in favour of assessee. Premium paid on government securities - Addition to income deleted by CIT(A) - Held that:- As decided in American Express International Banking Corporation Versus Commissioner Of Income-Tax [2002 (9) TMI 96 - BOMBAY HIGH COURT] that trading of securities is a banking business - as the assessee bank used to buy and sell securities to maintain statutory liquidity ratio, however, this buying and selling resulted into business income or loss was subjected to income-tax - in favour of assessee.

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• 2012 (12) TMI 326
  No opportunity of being heard given to assessee - Held that: - As notices u/s 143(2) were issued to the assessee on 30.6.2008, 17.4.2009, 18.5.2009, 10.6.2009, 21.7.2009, 1.10.2009 along with questionnaire and notice u/s 142(1 dated 30.6.2008 and 17.4.2009 served through speed post, therefore, the contention of the assessee that proper opportunity of being heard was not provided is without any basis. Addition to income - unexplained - Held that:- As CIT(A) affirmed the disallowance but no remand report was obtained from the AO and the disallowances were maintained on the ground that the necessary details could not be filed before the AO. Thus the issue is remanded back to the file of AO to examine the claim of the assessee afresh after providing due opportunity of being heard - in favour of assessee for statistical purposes.

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• 2012 (12) TMI 325
  Deduction being interest payable to HDFC - CIT(A) allowed the claim - Held that:- HDFC, institution in question, is not a Schedule Bank/ Public Financial Institution- it is non-banking financial institution. In these circumstances, it is not covered by provision of sec. 43B(e) , thus addition was made to the income of the assessee need to be deducted - in favour of assessee. Disallowance of prior period expenses - Held that:- Considering the assessee's contention that amounts in question were bad debts, but in the accounts same were disclosed as prior period expenses but the assessee in the revised return also had not claimed the said amount as bad debts, thus matter should be restricted back to the file of the AO - Also considering that First Appellate Authority first allowed the same as bad debts and later on passed an order u/s.154 with regard to an amount of Rs.1.22 Crores, the issue need to be reconsidered - in favour of assessee by way of remand. Disallowance of interest expenses - Held that:- FAA after considering the submission of the assessee held that though the advances were made to group concerns from the borrowed funds, yet same were advanced for commercial expediency, that advance were in pursuance of an agreement, that the assessee was granted permission to publish a magazine without payment or royalty and reduced payment of assets usage charges but had not mentioned as how the payment of Rs.2.33 Crores commensurate with asset usage charges, that agreement of royalty reduction and usage charges was not available to the AO - the matter should be remanded back to the A.O for fresh consideration - in favour of Revenue for statistical purposes. Refund of sales tax paid in excess of demand - addition to income - Held that:- FAA in appellate proceedings held that sales tax refund did not contain any interest paid by the sales tax department & directed the AO to verify the addition and delete the addition if there was no part of interest payment on the refund. From the orders available it is found that neither the AO nor the FAA has examined the issue of refund with reference to the provisions of section 43(B), so the matter is being remitted back to AO for further verification and to take a final decision - in favour of Revenue for statistical purposes. Disallowance of employees’ contribution to ESIC - Held that:- Considering assessee's submission that contribution to provident fund and ESIC were made before the filing of return of income the matter should be restored back to AO for verification of claim made by the assessee - in favour of assessee by way of remand.

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• 2012 (12) TMI 324
  Income from house property - computation of ALV - Sec. 7 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 is not applicable in respect of Flat C of the Madhukunj property - Held that:- Flat ‘C’ of Madhu Kunj property has been let out since July, 1970 & that Flat ’C’ of Madhu kunj became the asset of the firm M/s. Premchand Roychand & Sons with effect from June, 1979, thus Flat ‘C’ is on the same platform as Flat A & B of Madhukunj property and therefore the ALV of the flat ‘C’ should be computed in the same line as that of Flat A & B - The findings of the CIT(A) are reversed as ALV of Flat ‘C’ has to be determined as per the standard rent - No reason to sustain the money value of interest free deposit of Rs. 60,88,738/- as computed by the AO and confirmed by CIT(A). Therefore, the AO is directed to delete the addition of money value of interest free deposit - in favour of assessee. Disallowance being 10% of telephone, telex, and fax charges - Held that:- Considering the chart submitted by assessee it depicts that out of total debit of Rs. 14,06,991/- the assessee has recovered a sum of Rs. 9,58,197/- from its tenants thereby resulting into a net amount of Rs. 4,48,794/-. As it appears that this bifurcation of expenses was not before the lower authorities it is fit to restore this matter back to the file of AO to verify the details of this chart and restrict the disallowance of 10% to net amount only - in favour of assessee for statistical purposes. Disallowance of payment made to Ramabai Kokre - settlement amount in relation to a suit filed in the Small Causes Court in 1991 - Held that:- As the assessee had filed a plea made to Small Causes Court stating that the settlement has been arrived between the assessee and the wife of the driver by which the assessee has agreed to pay ex-gratia amount as paid by cheque No. 971080 dt, 17.11.1997 which has been acknowledged by the Legal heir of the deceased driver. Thus such payments are made to avoid unnecessary litigation and to buy peace of mind therefore need to allow the claim as business expenditure - in favour of assessee. Disallowance of expenditure of purchase of paintings - Held that:- Considering the nature of the business of the assessee he has to maintain the business centre by giving it a decent look therefore display of painting on its wall is to be treated as business expenditure. Having allowed the sum as business expenditure, the assessee will have to forego the depreciation on this amount which has been allowed by the AO - in favour of assessee. Disallowance of deduction being 10% of the motor car expenses - Held that:- Considering the chart submitted by the assessee as noted in Ground 2 it is found that out of the debits under the head motor car expenses, the assessee has also shown credits in the form of recoveries from tenants which has resulted into a net gain of Rs. 9388/-. The AO is directed to verify the details as per the chart and if the net result is actually a gain, then no disallowance can be made under this head - in favour of assessee for statistical purposes. Disallowance of professional fees - CIT(A) allowed the claim - Held that:- AO has not assigned any reason for not accepting the claim of the assessee except that the assessee has separately claimed expenses under the head office repairs and maintenance, office equipments etc. Thus the AO has not made out any case of making such addition - in favour of assessee. Disallowance of expenditure on computer software - CIT(A) allowed the claim - Held that:- As new and improved version of the softwares are available which render the existing software obsolete. Therefore, it cannot be said that these softwares give any enduring benefit. Accordingly no reason to interfere with the finding of CIT(A) - in favour of assessee. Disallowance of expenditure under the head repairs and maintenance - CIT(A) allowed the claim to an extent - Held that:- Since all the expenses so incurred are periodic costs which are necessary to maintain a business centre. The nature of business of the assessee has also to be kept in mind and in this line of business , the center needs new and better look every year in the form of wall paintings , new furniture and carpets . Therefore, no reason to interfere with the findings of CIT(A) - in favour of assessee. Disallowance of expenditure in respect of payment made to Conwood Contractor and Architects and for fixing new woolen carpet in office premises - CIT(A) allowed the claim - Held that:- Considering the explanation above & considering the nature of the business of the assessee, these expenses are nothing but period costs and are recurring in nature and allowed them as Revenue expenditure - in favour of assessee.

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• 2012 (12) TMI 323
  Claim of share trading loss - whether the assessee had declared the rights share in assessment year 1995-96 as stock-in-trade ? - Deduction u/s 80IA - Held that:- The assessee was promoter of GVMCL and shares acquired as promoter of the company had been declared as investment in the balance sheet. The company had come out with rights issue in February’95 and assessee had subscribed to rights issue only with the intention of selling the rights shares. The intention of the assessee can be gathered from the nature of entry made in the books of account at the time acquisition of rights shares in February/March, 1995. The assessee has submitted that the assessee had obtained the balance sheet of assessment year 1995-96 from CIT(A) in response to application dated 30.11.2011, a copy of which has been enclosed with the affidavit showing that the shares of GVMCL had been declared as stock-in-trade but from the perusal of the said balance sheet it is noted that the same is not the certified copy of balance sheet given by CIT(A) from his records because it neither bears the stamp of the office of CIT(A) nor there is any covering letter from CIT(A) enclosing therewith copy of balance sheet. Therefore, it is not established whether the balance sheet for the assessment year 1995-96 now being filed is copy of balance sheet filed during the assessment proceedings for the assessment year 1995-96. Thus the matter requires verification at the level of CIT(A) restore the matter back to CIT(A) for passing a fresh order - in favour of assessee for statistical purposes.

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• 2012 (12) TMI 322
  Deduction of u/s 80IB - excluding interest received on loans and advances from the computation - Held that:- AS in agreement with the proposition that ginning and pressing is an activity of manufacturing. However, so far as earning of interest is concerned, there should be direct and proximate nexus with the business activity. Therefore, on the issue of interest, the issue is need to be remanded to the file of the AO as for claiming deduction u/s 80IB there must be “direct nexus” between the activity/business and is should be “derived from” the business activity of the assessee. Disallowance out of oil mill hammali, pressing expenses, ginning Ludai expenses and Kapas freight and hammali - Held that:- Disallowance of these expenses were done or the reason that these were not supported by verifiable documents and were based on self made vouchers & hammali charges were disallowed on the ground that there was steep increase approximately it was 4 times in such expenses in comparison to preceding year though there was increase of quantity of purchase by about 2½ times only and even the self made vouchers were not signed by the payees.

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• 2012 (12) TMI 321
  Denial of exemption u/s 10(23C)(vi) - denial of claim was advancing of money to Total Diagnosis Private Limited - Held that:- The amount given by assessee to M/s. Total Diagnosis Private Limited was not a loan but was advance in pursuance to agreement to purchase the office space - the amount paid by the assessee society to M/s. Total Diagnosis Private Limited was immediately used by Total Diagnosis Private Limited for purchase of land on which building was to be constructed. On verifying the original agreement and found that stamps for executing the agreement was issued by vendor on 27.3.2005 vide entry no. 4115. All these notes were at the back of the original stamp on which agreement was executed. We also found the rubber stamp of date of issue of stamp by office of District Treasury on 24th March, 2005. Thus, the genuineness of agreement entered by the assessee is not in doubt. It is clear that the amount given by the assessee was not in the nature of loan but was an advance for purchase of office space and when ultimately the Total Diagnosis Private Limited could not give office space due to sanction being not given by Bhopal Municipal Corporation for construction of 4th and 5th Floor, the amount was paid back to the assessee with interest of Rs. 69 lakhs, thus, the transaction was a commercial transaction, where an interest was charged. Thus, there was no loss of any revenue in the hands of assessee society, even when the building could not be handed over to the assessee. Thus no violation of provisions of Section 13 for the advance given to the Total Diagnosis Private Limited for purchase of office space as it is not an amount lent but was in the nature of advance given for purchase of office space and hence exemption u/s 11 & 12 cannot be denied. The excess of income over expenditure is exempt u/s 11 & 12 - in favour of assessee. Disallowance of travelling expenses - Held that:- Trustees’ husband and wife both travelled to Delhi for necessary approval of ‘AICTE’. Minor daughter of Trustee aged 10 years had to be taken alongwith, because she could not be left alone only because the girl being the minor, she had to be taken along and could not be left alone, the expenditure incurred on travelling pertaining to such minor daughter cannot be declined. Furthermore, the amount is negligible and this cannot be treated as benefit to any persons, since these trips were wholly and exclusively for the purpose of society and not for personal purpose - merit in the action of CIT(A) in holding that assessee society has infringed provisions of Section 13 by giving advance to other societies - in favour of assessee. Assessing Officer is directed to recompute interest u/s 234D after giving appeal effect of this order.

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• 2012 (12) TMI 320
  Penalty u/s 271(1)(c) - bogus entries for purchases and sales of shares - income offered for taxation only after issuing notice u/s 148 - Held that:- Assessee in the original return of income has filed details of long term capital gain from sale of shares of M/s Robinson Limited were disclosed by the assessee. However, some additional documents as required by the AO could not be produced due to non-cooperation of M/s Robinson Limited, therefore, the assessee filed revised return on 22.5.2008 in which the income declared under the head long term capital gain was offered as normal income. The assessee also paid due taxes and interest thereon. As decided in CIT Versus Guru Ram Dass Fruit And Vegetable Agency [2001 (12) TMI 60 - PUNJAB AND HARYANA HIGH COURT] if the revised return is filed after investigation started but before issue of notice u/s 148 then no penalty is leviable - As in the present case assessment was framed wherein income offered in the revised return was accepted by the department without making any further addition. Notice u/s 148 was issued by the AO on 11.2.2010 i.e much after filing of the revised return, thus is not a fit case for levying the penalty u/s 271(1)(c) - in favour of assessee.

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• 2012 (12) TMI 319
  Unexplained investment in stock u/s 69 - survey - Held that:- Survey was made by the department on 22.2.2007 and since the amount in difference of Rs. 2,17,148/- was surrendered by the assessee, therefore, the assessee was not expected to keep the furniture forever especially when the Valuer also did not visit on 8th March, 2007, therefore, there is all possibility that the furniture thereafter might have been sold by the assessee - In such a situation, the valuation cannot be done by the Valuer and that too he did not go to the premises of the assessee, as has been claimed. It is a case of survey and how long the assessee will wait & since the assessee has already surrendered the amount of difference (valuation made by the survey party and declaration of the assessee), which was accepted by the department at the time of survey, therefore, no further addition is warranted - in favour of assessee.

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• Customs

• 2012 (12) TMI 395
  Jurisdiction to adjudicate the matter - held that:- impugned show cause notice was assigned to the Commissioner of Customs (Import), Nhava Sheva for adjudication - impugned order passed by the Commissioner of Customs (Import), Nhava Sheva is without jurisdiction - vide F.No. S/V-30/Misc-300/2005-M-II dated 27.08.2009 the appointment of Shri K.K.Srivastava, Commissioner of Customs (Adjudication) has been withdrawn - prayer made by the learned AR cannot be accepted as there is no adjudicating authority appointed to adjudicate the impugned show cause notice - impugned order is set aside and the appeals are allowed.

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• 2012 (12) TMI 394
  COD - application for condonation of delay of 221 days – Held that:- Right of appeal or right to file cross appeal is to be conferred by statute - in terms of the provisions of Section 35E of the Central Excise Act, 1944, the Tribunal has no powers to condone the delay caused in filing the appeal beyond the period of three months allowed by the provisions of the said Section 35E(4) - COD application stands rejected, the appeals filed by the Revenue are dismissed as barred by limitation

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• 2012 (12) TMI 384
  Refund claim – rejection of refund claim on the ground that while filing the Bill of Entry the appellant did not mention the exemption under Notification No.21/2002-CE dated 01/03/2002 - Held that:- It is the duty of the Customs Officer while assessing the bill of entry to assess in accordance with the law - there is an obligation on the part of the department to extent exemption given by an unconditional exemption notification and the same could not be refused because the appellant has omitted to claim that relief

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• 2012 (12) TMI 355
  Refund - unjust enrichment – Held that:- Certificate from the Chartered Accountant submitted by the appellants merely states that the extra duty has been accounted in the Profit and Loss Account and in the Balance Sheet - extra duty burden has been booked under the expenditure column and in the Balance Sheet does not show the extra duty amount as receivable from the department - extra duty burden has been absorbed in the cost of the output and the same has been passed on as part of the price of the goods -uniformity in price before and after assessment does not lead to inevitable conclusion that incidence of duty has not been passed on to buyer as such uniformity may be due to various factors – refund claim rejected

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• 2012 (12) TMI 354
  Revoking of CHA licence – alleged that Enquiry Officer has not conducted the enquiry as per Regulation 22(3) and (4) of the CHALR, 2004 - Held that:- On the previous unblemished record of the CHA, it must be borne in mind that a single act of corruption is sufficient to award the maximum penalty which, under the CHALR, is of revocation of the license - a personal hearing was given to the appellants on 24-1-2008 and the CHA did not reiterate for cross-examination of the officers listed as witness - enquiry was conducted regarding violation of Regulation 13(a) & 13(d) of CHALR. This is a fact on record that the CHA did not get any authorization from the exporter on whose behalf he was filing the export document. Since there was no authorization the violation of Regulation 13(a) has been established against the CHA by the enquiry officer as well as the Commissioner - revocation of the CHA licence by the Commissioner of Customs is sustainable

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• 2012 (12) TMI 353
  Transaction value for the purpose of levy of customs duty - whether royalty and licence fees is to be included in the assessable value? – Held that:- The agreement between the foreign supplier and the Indian importer states that the Indian importer has to pay royalty towards the ‘Video Rights’ of the imported goods, i.e. master Digi beta tapes containing the feature films. From the master tapes, the appellant makes VCDs/DVDs of the films and sells the same in the domestic market on which royalty is payable to the foreign supplier. The value declared at the time of importation is not the cost of film but only the cost of media in which the film is recorded and the same is not the value of the goods imported. As decided in COMMNR. OF CUSTOMS EXCISE, NEW DELHI VERSUS M/S. LIVING MEDIA (INDIA) LTD. [2011 (8) TMI 41 - SUPREME COURT OF INDIA] royalty is paid for the supply of the goods as a condition of sale has to be necessarily included in the transaction value for the purpose of levy of customs duty - the appellant has not made out any case for complete waiver of pre-deposit thus directed to make a pre-deposit of Rs. 80 (Eighty) lakhs within a period of eight weeks and report the compliance.

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• Corporate Laws

• 2012 (12) TMI 393
  Winding up of Company - auction and re-auction of property as per the direction of the Supreme Court - whether the finding of the High Court as regards the role of the official liquidator is correct or not. - held that:- On a perusal of the record, it transpires that the official liquidator had appeared before the recovery officer on number of dates. However, the DRT had returned a finding that he has a restricted role which has been found fault with by the High Court. In our opinion, the High Court is absolutely correct in its analysis and we concur with the same, but, a pregnant one, the fact remains that the High Court had set aside the sale on the foundation that a fair and transparent procedure had not been adopted. Having given due respect to the same, this court had passed orders on earlier occasions which we have reproduced hereinabove to get the auction conducted in a fair and transparent manner and recorded our conclusion. Therefore, the confirmation of sale as has been directed by us shall be treated to have attained finality. While confirming the sale subject to the conditions imposed hereinbefore, we are disposed to think that keeping in view the interest of the workmen and their rights, the High Court should deal with the rights of the workmen regard being had to the submissions advanced by the first and second respondents before it in an apposite manner and, if required, monitor the same. Presently to the Interlocutory Applications which have been filed for impleadment and withdrawal of the amounts that have been deposited as earnest money. Regard being had to the facts and circumstances of the case, all impleadment applications are allowed and the bidders who have deposited the money are allowed to withdraw the same.

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• 2012 (12) TMI 392
  Rectification of Share Register - dismissing application of appellant u/s 111A - condonation of 250 days delay - maintainability of Appeal - held that:- Special Leave Petition preferred by the appellant was argued at length and was withdrawn only when the appellant failed to make out a challenge on merits to the order dated 2nd February, 2012 of the learned Company Judge - appeal is accordingly dismissed as not maintainable.

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• 2012 (12) TMI 391
  Claim of Excise Department - Liability to pay Interest on principal amount - co. in liquidation - non-availability of funds - held that:- Central Excise Department is only a preferential creditor and his debt has to rank after the payment has been made to the secured creditors and to the workmen; Provident Fund Commissioner is to rank in a still higher priority; further submission being that as on date in view of the financial status of the company, no interest is payable by the company. In the present case admittedly no interest was agreed upon between the parties; argument of the respondent is to the effect that Section 11AA of the Act is operative by law and interest becomes payable in view of this statutory provision. Rule 156 envisages a situation where no rate of interest has been agreed upon between the parties. It postulates that interest can be paid up to a maximum of 4%. where the Official Liquidator has a surplus after payment in full of all the claims which are admitted to proof. It is only where an excess amount is available that the question of payment of interest will be considered as per Rule 179. As on date as is the submission by the Official Liquidator, Rs.2,20,00,000/- is lying with him out of which Rs.35 lacs has to paid to the workmen. The claim of the Central Excise has been admitted to Rs.1,85,04,400.76; the liability of the company today would thus be almost Rs.2,20,00,000/-. Keeping in view of the fund position, no fund is available with the Official Liquidator to consider the payment of interest to the Department. Claim of interest of the Department (Central Excise) dis-allowed - application has become infructuous and disposed of.

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• 2012 (12) TMI 352
  composition of offence committed u/s 621A of Companies Act - license u/s 25 granted to promote the game of cricket - held that:- Under sub-clause 6 of the licnece the company could pay remuneration to its members but only with the previous approval of Central Government - petitioner was aggrieved by the remuneration paid by the company to its members in the year 2008-09, 2009-10, 2010-11 - prayer made in this petition is that appropriate action be taken against the company for the breach committed by it of Sec 25 of Companies Act under which the licence has been granted - submission being that the breach of the mandatory conditions of the licence amounts to an automatic revocation - Except sub-section (10) of Section 25 of the Companies Act, there is no provisions u/s 25 of the Act which lays down a penalty for non-compliance of the licence granted u/s 25; for a breach of such conditions provisions of Sec 629 A of the Act have to be resorted to - no infirmity in impugned order of CLB; it calls for no interference. Appeal is without any merit; it is accordingly dismissed with costs of Rs. 20,000/-.

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• 2012 (12) TMI 351
  Winding up of Company - when alternate remedy is available - held that:- The word 'may' appearing in Sec 443 (2) has been construed to be read as 'shall' making it mandatory for the Court not to pass an order for winding up if there is an alternate remedy available to the petitioner. further winding up of a domestic or family company on just and equitable rule is permissible if there is a justifiable lack of confidence in the conduct and management of the company's affairs, grounded on the conduct of directors in regard to company's business. Misconduct of a petitioner that results in deadlock or breakdown cannot be a ground to wind up a company under the just and equitable clause. A party cannot take advantage of his own wrong, to ask for winding up under 433(f) of the Act. As the words 'just and equitable' themselves suggest the Court must be satisfied with the allegations of the petitioner that it is just and equitable to wind up a company". In the present case Business of the company is being run; it is profitable; one group in fact wants to out-buy the other. Both of them want to steer the wheel of the company. The parties have also not explored the alternative remedy either under the domestic forum or under Sections 397 if the same can be resolved by alternate modes and these alternate modes must be exhausted in the first instance; the winding up of a company is the extreme and last remedy and should be resorted to only as a final resort; this principle is fully applicable in the instant case. It is the interest of the company which is to be watched first; the personal prejudices and personal vendetta of one group qua the other cannot become the basis of a winding petition; pressure tactics cannot be applied - On all counts petition has no merit and is accordingly dismissed with costs of Rs. 25,000/- .

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• FEMA

• 2012 (12) TMI 396
  Master Circular on Wilful Defaulters - dis-closer of information by the Bank to RBI - Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 - held that:- no force in the submission that any information relating to a party who has defaulted in payment of its dues under derivative transactions cannot be disclosed by a bank to the RBI or any other bank because of an implied contract between the bank and its customer or by Section 45E of the 1934 Act. Sections 45C and 45E of the 1934 Act. Information relating to a party who has defaulted in payment of its dues under derivative transactions to the bank is credit information within the meaning of Section 45A(c)(v) of the 1934 Act. Sub- section (1) of Section 45C of the 1934 Act provides that the RBI may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the RBI from time to time. Hence, information relating to a party, who has defaulted in payment of its dues under derivative transactions being credit information may be called for from the banking company by the RBI under sub-section (1) of Section 45C of the 1934 Act. No force in the submission that the Master Circular has penal consequences and, therefore, has to be literally and strictly construed. Constitutional right of a person under Article 19(1)(g) - held that: - No challenge was made by the writ petitioners before the Bombay High Court to the constitutionality of the Master Circular and the challenge by the writ petitioners before the Calcutta High Court was to the constitutionality of only Paragraph 3 of the Master Circular relating to the Grievance Redressal Mechanism. Hence, we are not called upon to decide in these appeals whether the Master Circular violates the right of a person under Article 19(1)(g) of the Constitution of India. Master Circular covers not only wilful defaults of dues by a borrower to the bank but also covers wilful defaults of dues by a client of the bank under other banking transactions such as bank guarantees and derivative transactions. Wilful defaults of parties of dues under a derivative transaction with a bank are covered by the Master Circular and this we hold not because the RBI wants us to take this view, because this is our judicial interpretation of the Master Circular.

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• Service Tax

• 2012 (12) TMI 401
  Waiver of pre-deposit – Service Tax, interest & penalty – Business Auxiliary Service - Assessee has undertaken the activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers - This activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent - Held that:- As the applicant is entitled for the benefit of Notification no. 13/2003-ST which provides exemption from payment of service tax in respect of service provided under “Business Auxiliary Service” in relation to the sale of agricultural products. Hence, pre-deposit of duty, interest and penalty is waived and recovery of the same is stayed during the pendency of the appeal. Stay Granted.

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• 2012 (12) TMI 399
  Waiver of pre-deposit and stay of recovery of amount of Rs.18,931/- and equal amount of penalty imposed - rent for sales offices - held that:- Cenvat Credit is claimed in respect of service tax on rent paid for their office at Bangalore whereas their manufacturing unit is in the Raigad Commissionerate which is not an Input Service as defined under Rule 2 (1) of Cenvat Credit Rules, 2004 - pre-deposit of Rs.18,931/- (Rupees eighteen thousand nine hundred and thirty one only) to be paid by the applicants within six weeks and compliance to be reported on 21.9.2012. On due compliance, there shall be stay recovery of interest and penalty till disposal of the appeal.

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• 2012 (12) TMI 358
  Waiver of pre-deposit of Duty along with interest and penalty - Real Estate, Insurance Service, Outdoor Catering Services, Staff Welfare, Management, Maintenance or Repair Services - held that:- There is no nexus between the input services and the output services. The input service has been defined under Rule 2 of the CENVAT Credit Rules, 2004. These services in question are not integrity connected/related to the business of the applicant and the services do not have any nexus with the output services, in view of Rule 2(1) of the Cenvat Credit Rules - pre-deposit of Rs. 1,00,000/- (Rupees one lakh only) to be paid by the applicants within six weeks and compliance to be reported on 21.9.2012. On due compliance, there shall be stay against recovery of the balance service tax, interest and penalty till disposal of the appeal.

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• 2012 (12) TMI 357
  Tele Communication Service - Demand of service tax along with interest and penalties - liability to pay at place where service is provided v/s place where consideration is collected - Held that:- In a technology intensive operation like providing of telecommunication service backed up by computers it is always possible to find out the consideration received for service provided in taxable territory if only the appellant desired to do so. The appellant has prima facie encouraged sale of such cards in Jammu & Kashmir and not accounting and reporting services provided in the taxable territory this is a case of suppression of information with intent to evade payment of service tax, as the impugned telephone service was provided by the appellant and not the franchises who sold the card - short levy in tax is not attributable to the franchisees - appellant has to pre-deposit the entire tax dues arising from the impugned order for admission of appeal and if such amount is not deposited in time the appeal will be rejected without any further notice to the appellant - Decided against the assessee.

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• 2012 (12) TMI 356
  Demand of Service Tax - Management Consultancy Services - held that:- Impugned order on the issue of Taxability of the Service is set aside and remand the matter to Commissioner (Appeals) for fresh decision to deal with all the issues raised after granting opportunity of personal hearing to appellants - Appeal is allowed by way of remand.

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• Central Excise

• 2012 (12) TMI 390
  Application for modification of Stay Order - stay/dispensation of pre-deposit - In the present case on the application filed by the respondent, a direction was given to deposit only 25% of the amount of the penalty which had been imposed against the said respondent - Applicants claimed that they did not receive the notice - matter was got verified and ascertained from the registry that the notice was duly sent to the address stated on the fact of the Appeal Memoranda - Applicant Firm has not paid a single paisa till date - Tribunal after having exercised jurisdiction for the purposes of passing an order for waiver of pre-deposit u/s 35F of the Act cannot modify that order subsequently like an appellate authority, nor can keep tinkering with the order as and when applications for modification of the order are filed - Appeals are dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act, 1944.

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• 2012 (12) TMI 389
  Service of show cause notice - Benefit of concessional rate of duty claimed under Notification No. 25/97-C.E. dated 7-5-1997 - Demand of Duty with Interest – Held that:- There is nothing in the order-in-original or the record to show as to what proceedings took place pursuant to the show cause notice before the filing of written submissions by the assessee on 22-7-2005. Had the plea of the appellant, that show cause notice was served on the respondent in the year 1998, been correct there ought to have been some proceedings conducted during the period upto 22-7-2005. The order-in-original do not give any clue in this regard. Therefore, in absence of any evidence regarding service of show cause notice on the respondent prior to 22-7-2005, the impugned order of Commissioner (Appeals) holding the show cause notice to be time barred cannot be faulted.

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• 2012 (12) TMI 388
  CENVAT credit on various services - input services - use for the purpose of manufacturing - held that:- CENVAT credit on pest control allowed - Cenvat Credit on AMC for ST plant for sewage disposal allowed - AMC for air conditioners for instrumentation room allowed since there is a nexus between the said service and the manufacture of excisable products by the appellant inasmuch as testing of the products in the factory is an imperative requirement pre-clearance. - Cenvat Credit on canteen facility denied since the appellant admittedly did not have 250 or more employees/workers during the material period. Cenvat Credit on AMC for computers - certain part of the CENVAT credit taken on AMC for computers was reversed by the appellant accepting the fact that this much credit was not used in connection with manufacture or clearance of their products. - for the remaining part, credit allowed. CENVAT credit on Air travel agent’s service - claim of the appellant is that their employees had to travel extensively in connection with the business of the appellant – Held that:- There is no documentary evidence to show that the air travels made by the employees were in connection with the business of manufacturing and marketing of excisable products and not as part of any welfare scheme for the employees - challenge against denial of CENVAT credit on air travel agent’s service fails Online auction service - appellant submit that they used this service for disposal, by auction, of scrap which was generated in the course of manufacture of their final products. It is submitted that the scrap was also cleared on payment of duty. If that be so, online auction resorted to by the appellant is an input service used for clearance of excisable goods. A direct nexus stands established between online auction service and the clearance of excisable goods - credit allowed. Penalty - appellant has also challenged the penalties imposed on them under Rule 15 read with Section 11AC of the Central Excise Act. After hearing both sides on this issue, I take the view that the penalty-related issue requires to be addressed by the original authority, now that the appeals have been partly allowed. That authority is directed to take fresh decision on the question whether any penalty is liable to be imposed on the party under the aforesaid provisions – matter remanded back

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• 2012 (12) TMI 387
  Restoration of appeal – determination of annual production capacity – Held that:- the finding of the Tribunal’s Final Order No. 812/2010-EX, dated 17-8-2010 that the Commissioner’s order determining the annual production capacity of the Appellant’s factory was not challenged by them in the manner known to the law is factually incorrect. - In fact, it appears that this matter is pending before the Apex Court in SLP No. 22134/2008 filed by the Appellant. - ROA is allowed

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• 2012 (12) TMI 386
  Remission of excise duty - fire incident - loss of finished as well as semi-finished goods lying in store – Held that:- There is nothing on record to suggest that there was any material available with the Commissioner (Adjudication) to come to the conclusion that the appellant was not following the safety norms - appellant has filed insurance claim without including the duty element - appellant has placed sufficient material on record to show that finished/semi-finished goods were destroyed in fire accident cause due to short circuit - appellant is granted remission of excise duty pertaining to the goods destroyed in fire

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• 2012 (12) TMI 385
  Waiver of pre-deposit - demanded as interest and penalty – Held that:- Interest liability in this case is relatable to the transfer of credit of education cess effected by the appellant to make it a credit of basic excise duty. True, the taking of credit of education cess in the past was not irregular. But, when it was transferred to the credit column relating to basic excise duty, it turned out to be a case of irregular taking of basic excise duty in the CENVAT account and that credit was reversed only in August 2009 - Rule 14 of the CENVAT Credit Rules, 2004 is squarely applicable - appellant has not pleaded financial hardships. In the circumstances, there will be a direction to them to pre-deposit

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• 2012 (12) TMI 383
  Benefit of Notification 6/2006 - applicant supplied the TMT bars to Thermal Power Project, an inter-state thermal power plant which qualifies as mega power project at nil rate of duty by availing the benefit of Notification 6/2006 – alleged that the goods are classifiable under chapter 72 and not under Chapter Heading 9801 for which the benefit of Notification No. 21/2002 is available – Held that:- Goods imported for mega power project plant to be erected by BHEL is eligible for exemption from payment of duty - Appellants supplied the goods to bidders of International Competitive Bidding, the condition of the Notification is satisfied and there is no justification for denying the exemption notification to the appellant - waiver of pre-deposit allowed

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• 2012 (12) TMI 382
  Cenvat credit denied - Capital goods removed after use – Held that:- The capital goods i.e. D.G. Sets and Water Heat Recovery Equipment were disposed of in the market after putting them to use for a period of 9-10 years. Thus, it cannot be said that dispute of capital goods on transaction value would be covered under the expression “removed as such” so as to attract the reversal of Cenvat credit availed under Rule 3(4)(c) or Rule 3(5) of Cenvat Credit Rules. As decided in Commissioner of Central Excise, Chandigarh v. Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] removal of capital goods on which the Cenvat credit was availed after use on payment of excise duty on transaction value would not attract Rule 3(5) of the Cenvat Credit Rules, 2004.

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• 2012 (12) TMI 381
  Denial of Cenvat credit – alleged that the invoices are in the name of M/s. United Alkalies, Ghaziabad, although these invoices also bear the name & address of the appellants as consignee – Held that:- Credit in respect of the said invoices could not be denied on such ground of the alleged non-submission of documentary/duplicate copy of the invoices, particularly in the face of the said facts and documentary/corroboratory evidence - credit was allowed by the appellate authority after verification of the documents in terms of the observation made by the Tribunal in the earlier order while remanding the matter - substantive benefit cannot be denied on procedural/hypertechnical objection - Revenue’s appeal rejected.

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• 2012 (12) TMI 380
  Abatement of duty in terms of the proviso 1 of Rule 10 of the Pan Masala Packing Machines (Capacity of Determination and Collection of Duty) Rules, 2008 - Rule provides abatement in case a factory did not produce the notified goods during continuous period of 15 days or more - which point of time the counting of day start – Held that:- A day is a unit of time equivalent to approximately 24 hours - closure was for a period of 15 days - Revenue in support of their plea that the day should start from 00.00 hours at night has not placed any support or any material so as to justify their stand. Admittedly the closure was for continuous period of 15 days (by taking a day of 24 hours) and no infirmity can be found in the views adopted by Commissioner (Appeals). Revenue’s appeals are accordingly rejected

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• 2012 (12) TMI 350
  Extended Period of limitation invoked - appellant cleared the goods claiming the benefit of exemption notification no 64/95-CE dt. 16.3.1995 - Held that:- There is no evidence on record to show that the certificate is procured by the applicant from the Indian Navy by wrong representation or mis-representation as no investigation was conducted by the Revenue from the authority who issued the certificates to the appellant. The applicant also filed a necessary declaration under Rule 173B of the Central Excise Rules, 1944 in respect of the goods in question by claiming the benefit of Notification No. 64/95-CE. Copy of such declaration dt. 25 th September 1997 is produced by the applicant during the arguments. As the revenue was aware that goods in question have been cleared to M/s Mazgaon Dock Ltd. by claiming the benefit of notification, hence, the allegation of suppression with intent to evade payment of duty is not sustainable in the present case - in favour of assessee.

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• 2012 (12) TMI 349
  Extended period of limitation invoked - Evasion of Payment of Duty - appellant contended against demand as whole excise is revenue neutral - Held that:- As that one unit is clearing waste and scrap generated during manufacture of final products to the independent buyers at a higher price and to the other unit at a lower price. The fact of clearing waste and scrap to the other unit at a lower price was not disclosed to the Revenue. In these circumstances, it cannot be said that the appellants were not aware of the fact that the duty is to be paid on the same assessable value at which the goods are being cleared to the independent buyers. There is no evidence to show that the appellants were under the reasonable belief that they were not required to disclose the fact of clearance of waste and scrap to the other unit at lower price - extended period of limitation is available to the Revenue - in favour of Revenue.

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• 2012 (12) TMI 348
  MRP - provisions of Rule 4A - sales to dealers – Held that:- Period of demand is from 1-6-2006 to 31-10-2010, Rule 17 and Rule 2(j) of SWM Rules were deleted w.e.f. 31-1-2007 by GSR 425(E) - for the period w.e.f. 31-1-2007, the Commissioner’s findings that the goods sold to the dealers being multi-piece packages, there were requirement to affix MRP on the packages, would not be correct - period prior to 31-1-2007 when Rule 17 read with Rule 2(j) of the SWM Rules were there, the goods being cleared do not appear to be covered by the definition of ‘multi-piece packages’, as it is not the department’s case that each piece was individually packed in retail sale - no evidence that these boxes containing 100 pieces were meant for retail sale, there is no evidence that pieces of fasteners were individually packaged or labelled for retail sale - even prior to 31-1-2000, there was no requirement to affix MRP on the packages in which the goods were being sold to dealers and hence, the provisions of Rule 4A were not applicable - provisions of Rule 4A would not have been applicable if each individual piece was individually packed for retail sale and two or more of such individually pieces were further packaged in bigger boxes, which were also intended for retail sale – in favor of assessee In respect of the clearances to Spare Parts Division of Automobile manufacturers – Held that:- Provisions of Rule 4A would be applicable and the duty would be liable to be paid on the assessable value determined on the basis of MRP declared under the Provisions of Section 4A and in respect of these clearances, the dispute is only on the point as to whether in respect of such clearances of Spare Parts Division of Automobile manufacturers, the duty has been paid on the value determined under Section 4A - Appellant directed to make pre-deposit

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• 2012 (12) TMI 347
  Cenvat credit of excise duty paid on inputs - manufacture of sugar during crushing of sugarcane by-product/waste - bagasse emerges – alleged that since the appellant have not maintained separate account and inventory of the inputs used in or in relation to manufacture of dutiable final products - sugar and molasses and exempted final product - bagasse, in accordance with the provisions of Rule 6 (3) of Cenvat Credit Rules, 2004, they would be required to pay an amount equal to 8% of the sale value of bagasse – Held that:- Bagasse emerges in course of crushing of the sugarcane - crushing of sugarcane is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane - no need to maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse - Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any input-chemicals etc. having been used at that stage – in favor of assessee

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• 2012 (12) TMI 346
  Benefit of exemption under Notification No. 56/2002-C.E - AI claimed exemption under Notification No. 56/2002-C.E., dated 14-11-2002 as a unit situated in Jammu - As per this notification whatever duty is paid by AI through PLA is refunded to AI. Further the buyer of the product is able to take Cenvat credit of the duty paid by AI – alleged that such refunds were taken in respect of goods not manufactured in Jammu - Revenue is proposing to recover the refund amount both at the end of AI and at the end of the buyers shown in the invoices issued by AI – Held that:- Revenue’s argument that no processing was done in Jammu is not consistent with the observations recorded during the investigative visits. Arriving at the quantum of excise duty evasion done by the applicants requires much more” detailed hearing and examination of case records - demands confirmed at the supplier’s end and buyer’s end amounts to recovering the same amount twice once at the end of AI and again at the end of the buyers. A strict interpretation of the notification authorising refund and the Cenvat Credit Rules authorising taking of credit may result in such an outcome if the fraud made out by Revenue is held to be proved - waiver of pre-deposit allowed

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• 2012 (12) TMI 345
  Application for rectification of mistakes – cenvat credit - plea of the appellant is that Whytheat - C Special, Fire Crete, Air Compressor, Spare Parts for Compressor, Air Cylinder, Spare Impeller, Grate Bar, Grate Plate, Fork Lifter Truck and Lifting Chain were the items covered by the definition of the term - capital goods – Held that:- Modvat credit in respect of the above-mentioned items was disallowed on the ground that Clauses (d) & (e) to Rule 57Q were inserted for the first time by Notification No. 11/1995-C.E. (N.T.), dated 16-3-1995 and being so, the same cannot be applied to this case - appeal is restored to its original number. The ROM is allowed.

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• 2012 (12) TMI 344
  Assessable value – As per franchise agreement with M/s. Coca Cola Company, the appellants were required to buy NABB from M/s. Britco Food Company Ltd. - appellants were incurring expenditure on advertising, marketing and sale promotion of beverages - appellants received money from Britco Food Company Ltd. to compensate for expenses incurred on advertising, marketing and sale promotion and also as price support incentive –– Held that:- Prices stood reduced on account of concession given by M/s. Britco, supplier of concentrates (raw material), to the assessee - There is no evidence of flow back of any additional consideration from the buyers of aerated water (beverage) to the assessee - price uniformity was maintained. No favour for extra commercial reasons were shown to any of the buyers of aerated water. There is no evidence of any concession to any of the buyers. There is no evidence of existence of any favoured buyers - Rule 5 is not applicable - duty demand with interest and penalty set aside

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• 2012 (12) TMI 343
  Whether machining and drilling of holes activity amounts to manufacture - rough forgings - Held that:- Goods received by TWGI are rough forgings classifiable under Heading 7326 - products which emerges after being subjected to machining and drilling of holes by TWGI are clearly identifiable as a part of excavators and can be directly used, as such, and the same are classifiable as part of the earth moving machinery under sub-heading 84314990 - processes undertaken by TWGI would amount to manufacture and, hence, attract Central Excise duty - TWGI never informed the department about their activity - penal provision of Rule 26 of Central Excise Rules, 2002 would be attracted

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• 2012 (12) TMI 342
  Waiver of pre-deposit – classification - Jaljeera and Hazmi – Held that:- Any mixture of grinded spices packed in a packet can be termed as “packed masala” - Jaljeera and Hazmi are packed masala classifiable under Chapter 9 of Central Excise Tariff Act, 1985 particularly Entry No. 0903.10 - waiver of the condition of pre-deposit allowed

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• 2012 (12) TMI 341
  Activity amounts to Manufacture or not - appellants are engaged in the manufacture of HT/LT Coils for transformers and also are engaged in repairing of transformers received from the electricity boards - transformer oil is subjected to the process of filtration under vacuum and heating and, thereafter, the same is used for filing in the cavities in the transformers as liquid insulator – Held that:- Appellant had subjected the transformer oil purchased by them to the process of filtration and heating to make it suitable for their own industrial use i.e. for repair of the transformers. The process undertaken by the appellant thus, does not amount to manufacture – in favor of assessee

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• CST, VAT & Sales Tax

• 2012 (12) TMI 402
  Detention of goods - Imposition of tax and penalty under the OVAT Act and OET Act – Held that:- Consignment was covered with all valid required documents - party No. 3 without assigning any reason forcefully took the vehicle to Talasara Police Station without any notice or show-cause to the person in-charge of the vehicle – At the time of interception of the vehicle in question, the person-in-charge of the vehicle has tendered all the documents to the officer who intercepted the vehicle - it is nobody's case that the goods carried in the vehicle was not covered by valid documents or that the person-in-charge of the vehicle has furnished false/forged way-bill/document - Sales Tax Officer have acted illegally and the orders passed imposing tax and penalty under the OVAT Act and OET Act and the order passed by opposite-party No. 2 under annexure 1 maintaining imposition of penalty made by opposite-party No. 4 are not legally sustainable - writ petition is allowed

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• 2012 (12) TMI 359
  Writ petition – Kerala Value Added Tax Act - violation of principles of natural justice – alleged that without issuing any notice or hearing the petitioner, exhibit P9 assessment order was passed – Held that:- Assessment will be completed only if the assessment order is served on the assessee and any objection filed by the assessee disputing the assessment order should also be considered before completing the final assessment. If that principle is applied to the facts of this case, it can be seen that as on November 7, 2009 when exhibit P11 order was passed the first respondent should have taken into account the contentions raised in exhibit P8. Admittedly this was not done and for that reason exhibit P9 is vitiated - direct that the first respondent shall issue notice to the petitioner, hear them and pass fresh orders in the matter duly adverting to exhibit P8 objection filed by the petitioner also - in the event of passing fresh assessment order, it is for the first respondent to consider whether notice is to be issued under section 67 of the KVAT Act

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• Law of Competition

• 2012 (12) TMI 398
  Maintainability of compensation applications u/s 12B of MRTP Act - whether initiation of separate proceedings either u/s 10 or u/s 36B of MRTP Act alleging unfair trade practices by the respondents is mandatory for making a compensation application u/s 12B - Held that:- MRTP Commission has been vested with the powers under sub-section (3) of Section 12B of the MRTP Act to make an inquiry to the allegations of monopolistic or restrictive or unfair trade practice made in the application filed under sub-section (1) of Section 12B of the MRTP Act and to determine the amount of compensation realizable from the undertaking or the owner thereof, or, as case may be, from the other person, towards loss or damage caused to the applicant by reason of any monopolistic or restrictive, or unfair trade practice carried on by such undertaking or other person. These powers vested in the MRTP Commission under sub-section (3) of Section 12B of the MRTP Act are independent of its powers under Section 10 and Section 36B of the MRTP Act. There is also no reference in either Section 10 or in Section 36B of the MRTP Act to any of the provisions of Section 12B of the MRTP Act and if the Parliament intended to make Sections 10, 12B and 36B of the MRTP Act interdependent, there would have been some indication of this intention of Parliament in Section 10 or in Section 36B of the MRTP Act - In the absence of any such indication of this intention of Parliament to make the provisions of Section 12B of the MRTP Act dependent on initiation of an inquiry or proceeding under Section 10 or Section 36B of the MRTP Act, the Competition Appellate Tribunal clearly erred in coming to the conclusion that interdependence of the provisions of Section 10 or Section 36B with Section 12B cannot be lost sight of and in the absence of a separate proceeding alleging unfair, monopolistic or restrictive trade practice, an application for compensation under Section 12B of the MRTP Act is not maintainable.

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• Indian Laws

• 2012 (12) TMI 397
  Professional misconduct of Advocates - filing a compromise deed by forging and fabricating the signatures - Held that:- Professional misconduct committed by the respondent is extremely grave and serious. He has indulged in mischief-making. An advocate found guilty of having filed vakalatnamas without authority and then filing fictitious compromises without any authority deserves punishment commensurate with the degree of misconduct that meets the twin objectives deterrence and correction. Fraudulent conduct of a lawyer cannot be viewed leniently lest the interest of the administration of justice and the highest traditions of the Bar may become casualty. By showing undue sympathy and leniency to the advocate found guilty of grave and serious professional misconduct, the purity and dignity of the legal profession will be compromised. Moreover, the respondent-advocate had been previously found to be involved in a professional misconduct and he was reprimanded. Thus it would be just and proper if the respondent-advocate is suspended from practice for a period of three years from today - order passed by the Disciplinary Committee, BCI is modified and the respondent-advocate is awarded punishment for his professional misconduct.

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